Sareb has seen a decline in the value of its portfolio of financial and real estate assets. In 2022 the majority State-owned enterprise recorded a widening gap between the price at which assets could be sold today and their book value within the so-called bad bank framework. By the end of 2021 the impairment stood at €8,894 million and rose to €11,626 million, an increase of €2,732 million by the close of 2022.
Sareb sources say the main driver of this depreciation is higher interest rates and their impact on property valuations. Leveraging the portfolio’s deep knowledge, Sareb combines valuation with the actual sale prices achievable for these assets. Worsening assessments and weaker growth prospects further reduced the value of land and some tertiary-use properties. The portfolio teams note that they are getting to know the portfolio better with each assessment, and Sareb is nearing its end. They emphasize that the accounting valuation does not affect ongoing operations.
The rise in asset impairment is reflected in the corporation’s initial accounts, where the state remains the largest shareholder. In April of the previous year, Frob acquired 4.24% of the stake, pushing the state’s share to over 50% and completing the nationalization of the bad bank. This move aligns with Eurostat’s requirement to classify state-guaranteed Sareb obligations as public debt. By the end of 2022 Sareb’s public debt stood at €30,481 million, which is about 40% lower than what would be expected under its original founding terms.
Will Sareb be liquidated before 2027?
When Sareb was established in 2012, a 15-year window was set to unwind its foreclosed asset portfolio by 2027 after the real estate bubble burst. Company representatives stress that the management team is committed to selling the remaining assets, though they acknowledge the process will be challenging. They add that the objective is to maximize value, even admitting that some assets may need to stay valued higher than possible sale prices for a period of time.
In four years the board will decide whether to liquidate or extend the timeline. If liquidation is chosen, remaining assets would be transferred to a third party at substantial discounts, with the state absorbing the higher losses.
Sareb results in 2022
Last year Sareb completed asset sales totaling €1,642 million, compared with €1,375 million in 2021. Despite reporting a €1.506 billion loss related to its operating activities, Sareb managed to repay €2.388 billion in state-guaranteed debt and reduced liabilities by €795.8 million earlier this year. The final quarter of 2022 and the first two months of 2023 saw a retreat in sales as the portfolio management structure changed. In April new asset managers took over: Hipoges (backed by KKR) and Aliseda/Anticipa (Blackstone with Banco Santander), marking a shift toward consolidated asset management and a complete migration of ongoing processes. Management notes that operations are now functioning normally, and the new contracts are designed to improve efficiency and reduce Sareb’s costs.